Many executives own shares in the companies they manage and are also in high tax brackets. When faced with the choice between declaring dividends and repurchasing shares, managers may opt to repurchase shares as it is not a taxable event for them unless they sell their shares and with fewer shares outstanding, the stock price will likely rise. The company's investors may prefer dividend payments. Glven the discussion in the introduction to the course, this is an example of what theory in action?

Many executives own shares in the companies they manage and are also in high tax brackets. When faced with the choice between declaring dividends and repurchasing shares, managers may opt to repurchase shares as it is not a taxable event for them unless they sell their shares and with fewer shares outstanding, the stock price will likely rise. The company's investors may prefer dividend payments. Glven the discussion in the introduction to the course, this is an example of what theory in action?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Dual class stock is generally designed to Provide bigger dividends to majority owners. Help minority owners obtain board representation. Protect the voting rights of managing owners. Improve marketability of the shares. A shareholder in a troubled corporation is not likely to lose his/her: Money invested in the stock. Personal assets. Dividends declared. Par value. 3. An order to the New York Stock Exchange to buy or sell at the best price available is called: - A limit order - A stop order - a market order - a GTC order
The rationale behind granting stock options is toinduce employees to work harder and be moreproductive. As the stock price increases (presumably due to their hard work), the employees sharein this added wealth. Another way to share thiswealth would be to grant shares of stock ratherthan options. What are the advantages anddisadvantages of using stock options rather thanshares of stock as employee incentives?
A stockholder dissatisfied with the management of the corporation done by the Board of Directors surrenders his certificate of stocks and demands the return of the subscription price paid by him. Can he rightfully do this? Explain.
I have been told by a colleague who is studying accounting that our current accounting policy in relation to dividend may not be correct or in accordance with accounting standards. My colleague stated that many public companies have dividend policies, which have been communicated to shareholders as to the amount of the fully franked distribution, which will be paid to shareholders. It may be argued that such a policy provides the company with a constructive liability to pay the dividend. Currently, the dividend is not treated as constructive liability in Cairns Ltd. Could you please advise whether the constructive liability should arise?
If Indra intends to be a shareholder in the company over the long term, why is it that you may not have as sharp a preference for receiving dividends as compared to a shareholder who may be invested in the company for a much shorter time frame?
If stock dividends and stock splits don't give shareholders much value, why do you think companies still do this?
You are offered a job you know that accepting this job may eventually lead to a promotion into the role of the financial manager. As the potential financial manager, what federal and shareholder requirements would you need to be familiar with in order to ensure that you are being completely compliant? While investigating the shares offered to you by your potential boss, you discover that the company you are considering working for is not registered as required under the Securities Act of 1933. How does this influence you as a potential employee and as a potential shareholder relative to any applicable statutes or laws?
What are disadvantages for a company to go public by issuing equity in an initial public offering (IPO)? Question 16 options: a) It reduces information asymmetry for competitors b) Class action lawsuits can occur following large stock price drops c) It can attract analyst following resulting in myopic decisions d) All of the above are disadvantages of an IPO e) None of the above are disadvantages of an IPO
Which of the following describes preferred stock? a. Stock that sells for a very high price b. Stock that is sold to employees of the company as a performance incentive c. Stock which gives shareholders certain preferences and advantages over common stock d. Stock that is purchased by the corporation for investment purposes
Which of the following statements is NOT correct about the rights granted to common stockholders? Group of answer choices a. Stockholders may transfer their right to vote to a second party by means of a proxy. b. Dividends due to common stockholders are cumulative. c. Common stockholders have the right to elect a firm's directors. d. In large, publicly traded firms, managers typically have some stock but their personal holdings are generally insufficient to win voting control.
Empirical evidence suggests that IPO issues are generally: priced efficiently by the market. overpriced by investor excitement concerning a new issue. underpriced resulting from SEC regulation. underpriced, in part, to facilitate the issue. overpriced resulting from SEC regulation.
16. Which of the following statements is NOT correct about the rights granted to common stockholders? a. Stockholders may transfer their right to vote to a second party by means of a proxy. b. Dividends due to common stockholders are cumulative. c. Common stockholders have the right to elect a firm's directors. d. In large, publicly traded firms, managers typically have some stock but their personal holdings are generally insufficient to win voting control.

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